Question 1

The formula for the future value of a single amount is p × (1 + i)/n.

Accepted Answer

A) True 
 B)False

Question 2

McComb Inc. earns $900,000 and pays cash dividends for $300,000 during 2014. SFXl Corporation owns 70,000 of the 210,000 outstanding shares of McComb. How much revenue from investment should Cornwell report in 2014?

Accepted Answer

A)  $100,000 
B)  $200,000 
C)  $300,000 
D)  $400,000 
A)  $100,000 
B)  $200,000 
C)  $300,000 
D)  $400,000

Question 3

A decline in the fair value of a trading security is recorded by debiting an unrealized loss account and crediting the Fair Value Adjustment account.

Accepted Answer

A) True 
 B)False

Question 4

Hardin Park Company had these transactions pertaining to stock investments Feb. 1 Purchased 2,500 shares of Raley Company (10%) for $44,500 cash.
June 1 Received cash dividends of $1 per share on Raley stock.
Oct) 1 Sold 1,000 shares of Raley stock for 19,500.
Dec) 1 Received cash dividends of $2 per share on Reley stock.
The entry to record the purchase of the Raley stock would include a

Accepted Answer

A)  debit to the Stock Investments account for $43,500. 
B)  credit to Cash for $43,500 
C)  debit to the Stock Investments account for $44,500. 
D)  debit to Investment Expense for $1,000. 
A)  debit to the Stock Investments account for $43,500. 
B)  credit to Cash for $43,500 
C)  debit to the Stock Investments account for $44,500. 
D)  debit to Investment Expense for $1,000.

Question 5

Balentyne Company borrowed $95,000 on January 2, 2014. This amount plus accrued interest of 5% compounded annually will be repaid at the end of 3 years. What amount will Balentyne repay at the end of the third year?

Accepted Answer

Use future value of

Question 6

Chenard Company is about to issue $3,000,000 of 8-year bonds paying a 12% interest rate with interest payable semiannually. The discount rate for such securities is 10%. Below are time value of money factors that Chenard uses to calculate compounded interest. $$\begin{array} { | l | c | c | r | r | } 
\hline & \begin{array} { c } 
8 \text { periods, } \
10 \%
\end{array} & \begin{array} { c } 
16 \text { periods, } \
5 \%
\end{array} & \begin{array} { c } 
8 \text { periods, } \
12 \%
\end{array} & \begin{array} { c } 
16 \text { periods, } \
6 \%
\end{array} \
\hline \text { Present value 1 } & 0.46651 & 0.45811 & 0.40388 & 0.39365 \
\hline \text { Future value 1 } & 2.14359 & 2.18287 & 2.47596 & 2.54035 \
\hline \text { Present value of an annuity of 1 } & 5.33493 & 10.83777 & 4.96764 & 10.10590 \
\hline \text { Future value of an annuity of 1 } & 11.43589 & 23.65749 & 12.29969 & 25.67253 \
\hline
\end{array}$$ To the closest dollar, how much can Chenard expect to receive for the sale of these bonds?

Accepted Answer

A)  $3,193,390 
B)  $2,293,710 
C)  $3,325,130 
D)  $5,400,000 
A)  $3,193,390 
B)  $2,293,710 
C)  $3,325,130 
D)  $5,400,000

Question 7

FTX Company owns 10% interest in the stock of Zip Corporation. During the year, Zip pays $4,000 in dividends to FTX, and reports a net loss of $100,000. FTX Company's investment in Zip will affect FTX net income by a

Accepted Answer

A)  $4,000 increase. 
B)  $10,000 increase. 
C)  $10,000 decrease. 
D)  $4,000 decrease. 
A)  $4,000 increase. 
B)  $10,000 increase. 
C)  $10,000 decrease. 
D)  $4,000 decrease.

Question 8

Under the equity method, the Stock Investments account is increased when the

Accepted Answer

A)  investee company reports net income. 
B)  investee company pays a dividend. 
C)  investee company reports a loss. 
D)  stock investment is sold at a gain. 
A)  investee company reports net income. 
B)  investee company pays a dividend. 
C)  investee company reports a loss. 
D)  stock investment is sold at a gain.

Question 9

The factor 1.08160 is taken from the 4% column and 2 periods row in a certain table. From what table is this factor taken?

Accepted Answer

A)  Future value of 1 
B)  Future value of an annuity of 1 
C)  Present value of 1 
D)  Present value of an annuity of 1 
A)  Future value of 1 
B)  Future value of an annuity of 1 
C)  Present value of 1 
D)  Present value of an annuity of 1

Question 10

The account Fair Value Adjustment-Trading appears as a contra account in the income statement.

Accepted Answer

A) True 
 B)False

Question 11

Suppose you have a winning lottery ticket and you are given the option of accepting $7,000,000 three years from now or taking the present value of the $7,000,000 now. The sponsor of the prize uses a 6% discount rate. If you elect to receive the present value of the prize now, the amount you will receive is

Accepted Answer

A)  $5,877,340. 
B)  $6,046,880. 
C)  $6,230,000. 
D)  $7,000,000. 
A)  $5,877,340. 
B)  $6,046,880. 
C)  $6,230,000. 
D)  $7,000,000.

Question 12

If the cost method is used to account for an investment in stock, the Stock Investments account is increased by the amount of dividends received during the period.

Accepted Answer

A) True 
 B)False

Question 13

Reporting investments at fair value is

Accepted Answer

A)  applicable to equity securities only. 
B)  applicable to debt securities only. 
C)  applicable to both debt and equity securities. 
D)  a conservative approach because only losses are recognized. 
A)  applicable to equity securities only. 
B)  applicable to debt securities only. 
C)  applicable to both debt and equity securities. 
D)  a conservative approach because only losses are recognized.

Question 14

Barcelona Company owns 40% interest in the stock of ABX Corporation. During the year, ABX pays $20,000 in dividends to Barcelona, and reports $150,000 in net income. Barcelona Company's investment in ABX will increase by

Accepted Answer

A)  $52,000. 
B)  $60,000. 
C)  $8,000. 
D)  $40,000. 
A)  $52,000. 
B)  $60,000. 
C)  $8,000. 
D)  $40,000.

Question 15

Under the cost method, dividends received from an investee company are credited to the _______________ account, whereas under the equity method, dividends received from an investee company are credited to the _______________ account.

Accepted Answer

Dividend R

Question 16

Unrealized gains or losses on available-for-sale securities are reported where in the financial statements?

Accepted Answer

A)  Nowhere since only realized gains are reported. 
B)  In the "Other revenues and gains" or "Other expenses and losses" sections of the income statement. 
C)  Below extraordinary items in the income statement. 
D)  In the stockholders' equity section of the balance sheet. 
A)  Nowhere since only realized gains are reported. 
B)  In the "Other revenues and gains" or "Other expenses and losses" sections of the income statement. 
C)  Below extraordinary items in the income statement. 
D)  In the stockholders' equity section of the balance sheet.

Question 17

A higher discount rate produces a higher present value.

Accepted Answer

A) True 
 B)False

Question 18

An investment in short-term equity securities should be charged to a nominal account since the investment is temporary.

Accepted Answer

A) True 
 B)False

Question 19

Gulf Coast Corporation makes an investment in 100 shares of Eta Company's common stock. The stock is purchased for $52 a share. The entry for the purchase is

Accepted Answer

The answer of Gulf Coast Corporation makes an investment in...

Question 20

Hardin Park Company had these transactions pertaining to stock investments Feb. 1 Purchased 2,500 shares of Raley Company (10%) for $44,500 cash.
June 1 Received cash dividends of $1 per share on Raley stock.
Oct) 1 Sold 1,000 shares of Raley stock for $19,500.
Dec) 1 Received cash dividends of $2 per share on Raley stock.
The entry to record the sale of the stock would include a

Accepted Answer

A)  debit to Cash for $17,800. 
B)  credit to Gain on Sale of Stock Investments for $680. 
C)  debit to Stock Investment for $17,800. 
D)  credit to Gain on Sale of Stock Investments of $1,700. 
A)  debit to Cash for $17,800. 
B)  credit to Gain on Sale of Stock Investments for $680. 
C)  debit to Stock Investment for $17,800. 
D)  credit to Gain on Sale of Stock Investments of $1,700.

The formula for the future value of a single amount is p × (1 + i)/n.

McComb Inc. earns $900,000 and pays cash dividends for $300,000 during 2014. SFXl Corporation owns 70,000 of the 210,000 outstanding shares of McComb. How much revenue from investment should Cornwell report in 2014?

A decline in the fair value of a trading security is recorded by debiting an unrealized loss account and crediting the Fair Value Adjustment account.

Balentyne Company borrowed $95,000 on January 2, 2014. This amount plus accrued interest of 5% compounded annually will be repaid at the end of 3 years. What amount will Balentyne repay at the end of the third year?

FTX Company owns 10% interest in the stock of Zip Corporation. During the year, Zip pays $4,000 in dividends to FTX, and reports a net loss of $100,000. FTX Company's investment in Zip will affect FTX net income by a

Under the equity method, the Stock Investments account is increased when the

The factor 1.08160 is taken from the 4% column and 2 periods row in a certain table. From what table is this factor taken?

The account Fair Value Adjustment-Trading appears as a contra account in the income statement.

If the cost method is used to account for an investment in stock, the Stock Investments account is increased by the amount of dividends received during the period.

Reporting investments at fair value is

Barcelona Company owns 40% interest in the stock of ABX Corporation. During the year, ABX pays $20,000 in dividends to Barcelona, and reports $150,000 in net income. Barcelona Company's investment in ABX will increase by

Under the cost method, dividends received from an investee company are credited to the _ account, whereas under the equity method, dividends received from an investee company are credited to the _ account.

Unrealized gains or losses on available-for-sale securities are reported where in the financial statements?

A higher discount rate produces a higher present value.

An investment in short-term equity securities should be charged to a nominal account since the investment is temporary.

Gulf Coast Corporation makes an investment in 100 shares of Eta Company's common stock. The stock is purchased for $52 a share. The entry for the purchase is

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Filters

Exam 14: Understanding Investments and Acquisitions in Accounting

The formula for the future value of a single amount is p × (1 + i)/n.

McComb Inc. earns $900,000 and pays cash dividends for $300,000 during 2014. SFXl Corporation owns 70,000 of the 210,000 outstanding shares of McComb. How much revenue from investment should Cornwell report in 2014?

A decline in the fair value of a trading security is recorded by debiting an unrealized loss account and crediting the Fair Value Adjustment account.

Balentyne Company borrowed $95,000 on January 2, 2014. This amount plus accrued interest of 5% compounded annually will be repaid at the end of 3 years. What amount will Balentyne repay at the end of the third year?

FTX Company owns 10% interest in the stock of Zip Corporation. During the year, Zip pays $4,000 in dividends to FTX, and reports a net loss of $100,000. FTX Company's investment in Zip will affect FTX net income by a

Under the equity method, the Stock Investments account is increased when the

The factor 1.08160 is taken from the 4% column and 2 periods row in a certain table. From what table is this factor taken?

The account Fair Value Adjustment-Trading appears as a contra account in the income statement.

If the cost method is used to account for an investment in stock, the Stock Investments account is increased by the amount of dividends received during the period.

Reporting investments at fair value is

Barcelona Company owns 40% interest in the stock of ABX Corporation. During the year, ABX pays $20,000 in dividends to Barcelona, and reports $150,000 in net income. Barcelona Company's investment in ABX will increase by

Under the cost method, dividends received from an investee company are credited to the _______________ account, whereas under the equity method, dividends received from an investee company are credited to the _______________ account.

Unrealized gains or losses on available-for-sale securities are reported where in the financial statements?

A higher discount rate produces a higher present value.

An investment in short-term equity securities should be charged to a nominal account since the investment is temporary.

Gulf Coast Corporation makes an investment in 100 shares of Eta Company's common stock. The stock is purchased for $52 a share. The entry for the purchase is

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Filters

Under the cost method, dividends received from an investee company are credited to the _ account, whereas under the equity method, dividends received from an investee company are credited to the _ account.